On behalf of this party I express my agreement with one of the central points in the Taoiseach's address, that is, that the elimination of involuntary unemployment will remain the principle objective of the Government. We agree heartily with that objective. Undoubtedly the greatest waste that can occur in any country is waste of human time and human talent. The fact that such waste is occurring here on a scale higher than is the case in most other European countries must be a matter of prime concern not only for the Government but for all of us here. We must realise, too, that this waste will not be eliminated by any magic solution. In May and June of 1977 some people may have believed there was an easy way to solve this problem, but the only way in which unemployment will be eliminated is if we have the ability to produce and sell competitively both on the home and on foreign markets. Also, we must use our capital resources to the maximum effect in order to achieve employment. In all discussions relating to our economic performance we must have regard to those two pointers of our success.
It is appropriate to consider what has happened in terms of performance since Fianna Fáil were returned to office. As this is the closing debate of the 1978 calendar year we must consider especially what happened during this year. There are five major areas in which the Government's performance can be judged. First, let us take exports. The volume of our exports for this year is little more than half what was achieved in 1977—18 per cent as against 30 per cent, a significant drop. The figures I have given are in value terms, but obviously the growth in exports in volume terms has been approximately 10 per cent or even less.
Secondly, the amount that the Government are spending by way of budget deficit in order to achieve these objectives has doubled in 1978 compared with the previous year. In other words, they are spending more than they are taking in but are not achieving their objectives. This is a matter of grave concern. The external debt of the Government is now £150 million more than it was in July 1977.
Furthermore, apparently the best terms that this Government have been able to negotiate in respect of our entry into the EMS—although we await further intelligence on this—are such that our external debt will be doubled approximately if the full facilities are to be taken up. As I said yesterday, this is a matter of serious concern from the long-term point of view of this country for a number of reasons. First of all, it reduces our control as a debtor nation over our own economic policy-making. Secondly, the interest payments, which will be very substantial on such external debt, will not be subject to Irish income tax and, therefore, will not be capable of being recouped to the extent or in the same way as would interest payments on domestic debts. Therefore, the Government's contribution so far seems set fair almost to double our national external debt. Thirdly, if one adjusts inflation to eliminate from the calculations for 1978 the effect of the once-off removal of rates from houses, our rate of inflation in 1978 is likely to be 9 per cent as against 8 per cent in the UK. For as long as we are in the one currency area it is not possible for any major divergence to take place between our rate of inflation and that in the other country with whom we are linked in currency. However, any divergence is an indicator of the relative health of the two economies within the same system. The adjustment which I mentioned, which is a once-off matter, does not indicate any underlying improvement in our competitive position. It is merely transferring resources from one pocket to another. The fact that our rate of inflation is running faster by this extent than the UK rate of inflation is a clear measure of the effectiveness in this area of the policy of our Government vis-à-vis that of our neighbour country.
Next, in relation to the matter that I mentioned first, the reduction of unemployment, the Government are clearly off target. It is stated clearly in page 9 of their election manifesto that they sought a reduction of 5,000 in the number of unemployed in 1977 and a further reduction of 20,000 up to the end of 1978. That should mean, given the rate of 112,000 unemployed in July 1977 when this Government took office, that unemployment, if the targets set out in the manifesto had been achieved, would now stand at 87,000. Unemployment is at or about 98,000. The Government have gone barely half-way in the period so far in achieving their own stated objective in terms of reduction in unemployment.
These failures which I have indicated can be traced directly to the policies which the Government themselves adopted in taking office in 1977 and subsequently in their budget of 1978. In the first place these policies involved the raising of expectations, and the creation, prior to the 1977 election, of the idea that all that was needed to solve our problems, in the short-term at least, was to spend, spend, spend. When they got in, that is what they did. They pumped money into our economy on a very considerable scale. This pumping into the economy of money at that time was described by one member of the Government as the biggest gamble in the nation's history. In view of the indices that I have quoted—the fall in the growth of exports, the increase in budget deficit, the increase in external debt, our relatively poor rate of inflation compared with the UK and our failure to reach the Government's employment targets—is it not time to ask whether this, the biggest gamble in our nation's history, is going to come off? As a result of this gamble there was an unprecedented consumer boom and the two detrimental results of this were, firstly, a substantial relative increase in imports over exports, and secondly, very much increased speculative profits to the detriment of the consumer.
I will illustrate the comparison I have made in relation to imports over exports. Where did the money go that the Government pumped into our economy to generate this consumer boom? It went abroad in relatively larger measure than it stayed at home. Retail sales in 1978 have increased in volume by 10 per cent but imports at the same time have increased in volume by between 12.5 per cent and 14.5 per cent. If imports have increased by that scale it is likely that domestic sales have increased by less than the average of 10 per cent. Relatively speaking, this pump-priming exercise, because of its undifferentiated nature, did not take account of the sectors of our economy where pump-priming was specifically needed. The Government adopted what could be described as a macro-economic approach where they should have applied a micro-economic approach. The result was that this money which was pumped into our economy with a view to creating employment is, relatively speaking, making a greater contribution to creating employment abroad in countries selling goods to the Irish economy than it is in creating employment in this country.
Secondly, this led to speculation and profit-taking by groups in our economy who are best placed to do so. I can best indicate this by reference to the situation in the housing sector. In the first six months of this year as against the first six months of last year, as a result of the Government's £1,000 grant and other measures intended to promote housing developments being in the form that they were, the cost of a house to somebody buying one has increased by three times as much as the cost of a house to the man who is building it. Clearly, the money being used with a view to creating improvement in housing is not being used to assist the consumer, the person who is buying a house, but it goes into the pockets of builders or other people in that sector. In the first six months of 1978 as against the first six months of 1977 building costs are up by only 10 per cent, whereas the cost of a house to somebody seeking to buy one has gone up by 33 per cent. Those figures just do not add up unless there have been very substantial speculative profits. The £1,000 grant served no other purpose than to provide money for those engaged in the building industry without improving the position to any appreciable extent of those seeking houses.
I contend also that the spend, spend, spend approach characteristic of the Government's economic policy in 1977 contributed to the fact that wages, salaries and incomes generally during 1978 ran far ahead of increased production in our economy and is contributing also to a significant reduction in our competitive position.
It is appropriate at this stage to remind the Government of what they thought they would achieve in this context in 1978, as indicated by the Minister for Finance in his budget statement of February last. I shall quote extensively from the Minister for Finance on that occasion. I shall leave it to the House and the country to compare the performance in this context with what the Minister hoped would happen, as expressed in his budget statement, when he said, at column 357 of the Official Report of 1 February 1978:
The Government believe that improvements in real incomes are best secured in present circumstances through moderate increases in nominal incomes associated with personal tax concessions. For the year 1978 our target is to pay increases of about 5 per cent. To make this acceptable, we have already reduced or abolished rates, motor taxation and social insurance contributions and are proposing concessions in personal taxation—concessions which will result in substantial gains in after-tax pay for wage and salary earners. Adjusting for the expected rise in consumer prices this year, there will be a considerable improvement in real take-home pay, and this will be a lasting improvement, not an illusory one.
The Minister continued to say, at columns 357 and 358:
I should like to clarify aspects of the pay target proposed by the Government. The target was formulated
—this is a target of 5 per cent—
only after careful and detailed examinations of the requirements of the economy in both the short- and medium-term. Demands for flexibility and for adjustments in line with inflation have to accommodate themselves to the need for pay moderation. The Government's commitment is unequivocal and, if agreement to such moderation cannot be achieved, we shall have to take the necessary measures to ensure that excessive increases, if any, are recovered from those who secure them. The Government would be failing the community if they did not take such steps.
What happened? In fact the increase was not 5 per cent. The total increase in wages and salaries in 1978 is expected to rise by 18 per cent. The result of that has been identified by the Central Bank as a significant loss in competitiveness for our exports abroad. The Government set out to achieve a 5 per cent target. By virtue of their failure in political leadership, by virtue of what has been described in this House on many previous occasions as the anti-social nature of many of their policies, far from achieving the 5 per cent which the Minister for Finance so trenchantly insisted would have to be achieved, they had an 18 per cent increase, which is over three times as much as they had hoped. Of course the result of this has been a loss in our competitive position. The fact that imports are running ahead of exports in our economy in 1978 is a direct result of this failure of Government economic policy. The fact that such a wage agreement was negotiated stemmed directly from the raised expectations created during 1977. The impression was given at that time that the money was there for the asking. There was money there to abolish rates, to abolish motor tax. Naturally then the workers, through their negotiators, ask why should there not be money available to give them significant increases in real incomes? On the one hand the Government were saying that the money was there for one purpose but that it was not there for another. And it is not any great wonder that they were not believed.
If we are to succeed as an economy we must ensure that we remain competitive and that increases in incomes do not run ahead of those in real economic production. This will not be achieved simply by talking about it. It will not be achieved by speeches being made in this House or elsewhere. It will be achieved only by consistent political leadership on the part of the Government. There is no use hoping, as the Government seem to do in their White Paper on the Economic and Monetary System, that, in some magical way—perhaps by becoming members of the Economic and Monetary System—our income increase problems, in so far as they exceed production increases, will be solved magically. The Government say that furthermore the discipline involved in membership of a zone of monetary stability acts as a powerful aid in the fight against inflation. That discipline will take place only if there is concerted leadership from the Government. It will not take place automatically unless, of course, the Government envisage that the discipline to flow from membership of the EMS is that of further unemployment. I do not think that would be acceptable to anyone.
My criticism of the Government at present is that they are not taking steps that should now be taken to achieve a moderate national wage agreement in 1979. This was most evident in the negotiations for entry to the EMS. These were complex negotiations, in many cases directly affecting the potential livelihood of workers in industries vulnerable to appreciation of our currency vis-à-vis sterling. Did the Government attempt to take on the social partners? Did they attempt to take the unions representing the workers in those industries into their confidence in the EMS negotiations? They did not even give them accurate information as to what was happening in those negotiations. They made no attempt to assess the likely impact on particular sectors of our economy of our becoming members of the EMS. There was no taking into the confidence of the Government of the trade unions, the employers or the other sectors of our economy in these negotiations, as there should have been. If we are expecting as apparently the Government are in their White Paper, that discipline will occur automatically as a result of our becoming members of the EMS, we are bound to be sadly disillusioned. Discipline will occur only if the Government show their earnest progressive social policies and by taking those involved on both sides of industry into their confidence in negotiations taking place. It is through those means only that discipline will be achieved voluntarily. Discipline cannot be achieved externally, as the Government seem to think, simply by joining a system or by making speeches. Discipline will be achieved only by conscious policy.
I wonder are the Government actively seeking a national wage agreement at all at this stage. Indeed, if we do not get a national wage agreement, the consequences in terms of industrial unrest will be immeasurable. The Taoiseach has referred to this already, pointing out, rightly, that the actual number of days lost does not fully represent the position, because the days lost in Irish industry have been in strategic areas of our economy which cause widespread hardship. One cannot measure those simply and solely in terms of days lost; one must measure them in their overall economic context. There is no doubt in my mind that the strikes that have been taking place in our economy since the present Government assumed office have been far more damaging in overall economic terms than one might expect from the average type of strike that takes place across Europe. If we do not get a national wage agreement, if there is no discipline at all in this situation, obviously the strike situation will worsen from its already unacceptably bad state. The Government should be taking positive action, in the form of the consultations I have mentioned and taking the social partners into their confidence, to achieve the moderate wage agreement necessary for the success of our exports and economy.
The lecturing posture they are adopting will not suffice for this object. There is great need to strengthen the position of the Irish Congress of Trade Unions and I very much regret that the whole area of industrial relations has been shelved by the Government in their establishment of an industrial relations commission. This body will not, I gather, issue any interim reports and we may wait for a very long time for a report, during which period industrial relations will continue in their present bad state without any legislative action being taken. Far from awaiting the report of this commission, a commission set up, it seems to me, as a delaying tactic to avoid the taking of difficult decisions, the Government should now be considering entering into consultation with the Irish Congress of Trade Unions to see what can be done in an overall structural sense to improve the climate of industrial relations.
I believe, too, the international credibility of the Government's economic policy is more important now than it ever was in the history of the State. Hitherto it was possible for Governments to behave in their economic policy with reference only to domestic political considerations. It was possible for them to have election budgets and to have artificial injections of money into the economy at particular times, when it suited them politically, without reference to the economic needs of the country. This will no longer be possible. From now on the international credibility of our Government's economic policy will be of critical importance for two reasons: first of all, because it now looks as if our foreign debt will, as I said, be doubled and, if it is doubled over its present high level as a result of the terms of entry to the EMS, that will mean that the Government's finance will be coming to a far greater extent from abroad and the bankers of the world will have a much closer eye than hitherto on the policies of the Government. The Government will, therefore, have to take account of their views.
Furthermore, if as now seems likely, we are to have an independent currency in the context of the EMS and if we are to stay within the bands of relativity vis-à-vis the central currency in the EMS, again we will have to take account of possible speculation against our currency and so the Government's economic policy will have to be such as will command confidence both on the part of those who are lending the Government money and those who may or may not be in a position to buy and sell our currency in the international exchange markets. The first essential then on the part of any Government for a credible economic policy internationally must be that it be consistent.
I believe the policy of the Government falls on its face in so far as consistency is concerned. There has been no consistency whatsoever in the Government's economic policy. The Government are pursuing a diametrically opposite policy in the latter half of 1978 to that which they pursued during 1977. In 1977 there was money to abolish road tax. In 1978 there is no money to maintain the roads even at a minimum standard of safety. In 1977 there was money to abolish domestic rates regardless of the size of the houses. In 1978 there is not apparently, if the Government's pronouncements and flag waving are to be taken into account, money to maintain food subsidies and, remember, food constitutes a far greater proportion of the budget of the poorest section of the community than it does of the budget of any other section.
Now these are manifestly inconsistent policies. In 1977 there was money for anything. In 1978 there is apparently money for nothing. Can we expect people abroad to have confidence in a Government whose policies are so inconsistent and who seem to be operating what one could describe as a zig-zag economic policy, this way this year and another way next year? I do not believe people abroad can have confidence in such a Government and I believe the Government must mend their ways if we are to achieve international credibility and confidence in Government consistency and belief in the seriousness so essential to the survival of the economy, not only in the EMS but also in the competitive world in which we are now living.
I have so far been concerned with what I regard as the failings of the Government's economic policy with reference to a number of indicators. I now propose to make suggestions which I believe the Government should take into account in an effort to improve its economic policy. The priority for any economic policy must be the creation of employment and that will only be done if, on the one hand, we can produce and sell competitively abroad and, on the other hand, use the capital resources of our economy to maximum efficiency in terms of employment creation. There are a number of areas where action can be taken to improve the situation. I will mention eight areas of action. First of all, I would like to see the Government take action on the private investment trust suggestion made in the Green Paper published by the National Coalition Government. This was a novel idea designed to bring together private and public capital, to bring together what one could describe as a joint enterprise to establish new product ideas. For instance, where the technical expertise might exist in one firm and the capital might exist in another there would be created some means of bringing the two together in a private non-governmental union without undue bureaucratic interference. That idea should be put into effect.
Secondly, we must seek to maximise the use of our existing capital stock by the encouragement of renting of such capital stock. At the moment too much of our capital lies underutilised because of the strict emphasis on owner occupancy. I believe this policy can be achieved in three major areas. First of all, it can be achieved in the encouragement of greater long-term leasing of land. There is room too for such a policy in the area of fishing where boats are invariably skippered by one individual with the result that they stay in port for two out of three days whereas, if there were emphasis on renting, it would be possible to have two skippers and two crews and the boats could stay at sea for a substantially longer period. There is need also for greater encouragement of renting in housing. Much of our housing stock is underutilised because renting terms are unattractive. The Government should take a look at this whole area to see what can be done to achieve its housing objectives by increasing utilisation of our existing housing stock as well as by improving the output of new houses.
There is need also to examine the grant and tax incentive package to industry to see if it puts an undue emphasis on capital intensive industry to the detriment of labour intensive industry, the creation of employment being the optimum objective of Government policy and, if such industry is competitive, is it more desirable than capital intensive industry if it can survive and remain competitive.
Taking on the one hand that grants are given as a proportion of the total cost of investment rather than of the new industrial jobs created by the IDA, on the other hand there are very substantial incentives to industry in the form of relief of income tax for interest payments on debt, and these two combined, to create an incentive to invest in substantial blocks of capital for the creation of new industries rather than the creation of new jobs, involve an artificial element—one cannot put a figure on how high this is—which is partial to the creation of capital intensive rather than labour intensive industries. This area should be examined in a critical fashion by the Government. The overall package of incentives to industry, both grant and tax, should be studied in order to distinguish such an artificial element in incentives and to remove it.
Furthermore, there is a strong case for a much more serious approach to manpower planning in the economy to ensure that we will get the best possible return for investment designed to create employment. There is no point in making substantial investments to create a type of job in which people are not interested and for which there is not sufficient demand, while neglecting other areas of the economy where people are seeking but cannot get employment. We have been pumping in money and hoping that in some magical way it will reach those who need it and create jobs for those who need them. That is not the right approach. Any injection of money into the economy for job creation must be based on a thorough analysis of our available manpower and must be directed towards the employment of that manpower.
Therefore, we need a much more detailed analysis of the live register to find out where the unemployed are, who they are, what skills they have, how available for work they are, and having done that we should draw up an action plan to find jobs for those specific unemployed people. We must think of them as people with skills, people with homes, people living in particular parts of the country, and having identified them as individuals, we must then try to provide jobs for them rather than persisting with the macro-economic policy approach of pumping in money in the hope that by some formula it will reach those who need jobs. Heretofore, under the macro-economic system, a substantial portion of the money given to housing ended up not in new houses but in increased profits for builders without commensurate increases in housing activity.
Our whole educational system needs to be examined from a manpower point of view. There is a need for a central manpower planning unit in the Department of Education to examine the entire output of the educational system at second and third levels to see if our educational system is producing the type of people for the types of jobs that are likely to come into being in our economy. Increasingly, it is Government money more than anything else that is involved in our educational system, and there is no use spending substantial amounts of Government money educating people in skills for which the economy does not have any use, while on the other hand there are many skills in our economy which are scarce.
We therefore need a central manpower planning unit involving not just the Department of Education but also that of Labour so that in so far as State funds are concerned—people are entitled to do what they wish with fees contributed by them for educational purposes—the money will be spent with the primary purpose of having people coming out of our educational system who will be able to find jobs. We must ensure that our job creation and educational programmes will be synchronised. I would describe this as a micro-economic approach and it is the right one at this time. The time for the broad ranging Keynesian approach has gone out the window. We are an open economy and much of the benefit of a Keynesian pump-priming effort in our economy goes abroad because we are so open to trading abroad.
I believe there is a need for reclassification of our capital budget. At the moment, projects which are directly productive and projects in the capital area which are not productive at all are classified together as capital projects. A hierarchy should be established by our capital budget with priority being given to Government capital investment which has a directly productive effect.
In the concluding portion of my contribution I shall now deal with agriculture. I regret that there are five major items in the Government's election manifesto in relation to agriculture which remain unimplemented. I will just mention the items which have not been implemented. First of all, there was a promise to establish a national livestock development programme. Apparently that has not been heard of. Second, there was a promise to establish a grain marketing and information board. It has not been heard of. Third, there was a promise to introduce a potato marketing and development board. It has not been heard of. Fourth, we had a promise to introduce a 3 per cent subsidy on interest rates in an expanded capital development programme. That has not been introduced. Fifth, there was a promise to establish a new body to supplement and co-ordinate the activities of the existing agricultural marketing organisation. This new body has not appeared and there is not a sign that it will.
There are many areas in regard to agricultural policy which need urgent Government attention. First of all, there is significant evidence that our beef herd is declining rapidly and that our capacity to avail of opportunities in the years ahead for sales of beef is being reduced. There has been an increase in our dairy herd but it has been at the expense of our beef herd in which there has not been an overall increase in numbers. There is an urgent need to introduce a scheme along the lines of the in-calf heifer subsidy scheme to give a direct incentive to increase our beef herd numbers.
If we cannot and do not increase our beef herd numbers now the cattle will not be there for export and for the provision of jobs in our meat factories throughout 1979, 1980 and 1981. It appears to me that as well as the increase which is apparently taking place in heifers being put in calf of 7,000 this year, to make up for the losses through cow slaughters we would need to have an increase of 50,000, not 7,000 heifers in-calf this year. The figure given recently by the Minister of State is quite inadequate to compensate for the loss through slaughter. I therefore call on the Government urgently to introduce an in-calf heifer subsidy scheme.
There is great scope for the export of malting barley particularly as we know that there were some exports of malting barley last year to Germany. If the Government had established as promised the grain marketing information board I think that body would or should now be seeking increased markets for malting barley abroad so that we could use the land that is being vacated by the declining numbers in the beef herds—that is another area where action should be taken urgently.
We also need to look at the composition of our sheep flock. There is evidence that the decline in lowland sheep numbers has been such that there is undue concentration in the overall flock on mountain breeds. In so far as the terms of the French lamb agreement are a determinant factor—and they are because much of our lamb is going to France—these mountain breeds alone are not likely, if crossed with one another rather than crossed with a lowland breed, to produce the type of animal that will meet the strict criteria which exist for admission to the French market. I therefore urge a special incentive scheme for the use of these cheviot breeds, for instance, on these mountainsides.
I believe there are great prospects for improvement in meat processing and processing of meat and food in general to a much greater extent than has been the case so far. One of the bottlenecks in the meat industry is the training of sufficiently skilled personnel for this purpose. One of the reasons for the bottleneck is that we have the Department of Agriculture on one hand dealing with the meat industry itself and the Department of Education on the other dealing with the educational institutions such as regional technical colleges. The Government should take action—the Ministers for Agriculture and Education together—to establish a meat industry training scheme to provide the type of skilled personnel necessary if we are to get added value in our meat industry and in other processing industries of the type that will enable us to maximise profit in this country from our important agricultural production.
The last part of my address is concerned with the remarks made by the Taoiseach in regard to Northern Ireland. I agree with the emphasis that has been put on an agreed settlement. I also agree with the emphasis on practical co-operation, but as Deputy Harte pointed out in an interjection during the Taoiseach's address there seems to be little actually happening in terms of co-operation between North and South. There have been proposals, talks and studies but very little, if anything, is actually happening on the ground. I contend that there are two areas where action could be taken immediately. One is in the area of drainage. There is money available from the EEC and we can see how quickly it could be put into use in the west of Ireland under that heading. Money is also available for cross-Border drainage. The Government could be doing much more to drain those river catchments which cover both sides of the Border. I also believe that there is a need for a joint training scheme in agriculture involving young farmers on both sides of the Border which would enable southern students to attend Northern Ireland agricultural colleges and northern students to attend southern agricultural colleges. Such a scheme could be introduced very quickly if the Government had the will to do it.
I should like to refer to one sentence in the Taoiseach's speech which I think requires to be clarified. He said:
There is no place in our plans for unity by force or for any instantly imposed solution.
If the Taoiseach does not envisage any instantly imposed solutions does he envisage a solution imposed in some way other than instantly? The fact that the idea of an imposed solution had to be qualified by using the adverb "instantly" is to my mind an equivocation on the Taoiseach's part in respect of an important matter. The Taoiseach should clarify his position in that regard. He should make it clear that he does not intend to use coercion in relation to a solution for Northern Ireland either instantly or otherwise. The fact that he thought it necessary to insert that adverb is to my mind a matter of concern which should not be so left for long and which should be clarified.
